The scale of growth in private equity funding will outpace that of hedge funds over the course of the next five years and make private equity the single largest alternative asset class.
That’s according to a survey of individuals operating within different areas of the alternative assets industry carried out by the investment data provider Preqin.
Private equity is already in a period of rapid growth and expansion is set to continue for the next few years at least, according to Preqin’s polling of asset managers and investors in various parts of the world.
Around $3.1 trillion worth of assets are currently managed worldwide as private equity funds but an extra $2 trillion is expected to be added to that figure by 2023 at a growth rate of 58 per cent.
Should that pace of growth be experienced by the private equity sector as forecast then it will comfortably outpace expansion among hedge funds, where assets are tipped to swell by 31 per cent and by around $1 trillion over the next five years.
Taking the alternative asset class in its entirety, to encompass not just private equity and hedge funds but also private debt, real estate, natural resources and infrastructure funds, overall expansion is expected to be clocked at around 59 per cent between 2018 and 2023.
That scale of projected growth would equate to some $14 trillion being collectively added to the funds available for investment across all alternative asset classes.
“If anything, we believe that $14tn is more likely to be too low than it is to be too high,” Preqin’s chief executive Mark O’Hare said in a statement.
“Fourteen trillion dollars may sound like an overly ambitious prediction for the alternative assets industry, but it is lower than the average growth rate we’ve seen in the past decade.
“There are several key factors that will drive this growth, including: the proven long-term performance of alternatives; the growing opportunities available in private debt; and the rise of emerging markets in which alternatives funds are already entrenched.”